# Eps 497: The Chopping Block with Eigenlayer

<img src="https://hackmd.io/_uploads/ryi7UIJ83.jpg" width="50%">

### Sreeram's background

- In a previous life, worked in academia and had David Tse and Promod Viswanath as advisors.
- Building in crypto is different than academia or working at a startup as in you need to involve the community and the various stakeholders earlier in the protocol lifecycle.
- Phd in information theory and in particular on building p2p wireless and then worked in computational genomics.
- Sreeram: "Crypto is coordination super-highway. You need mechanisms for long-term memory and long-term enforcement ... core thesis of crypto is to be a commitment engine which makes coordination easier."

### Eigenlayer explained at five levels

- **5 year-old** -> Haseeb: "On Ethereum, we have policemen protecting the government building. But with Eigenlayer, the same policemen can protect all buildings."
- **High-schooler** -> Robert: "On bitcoin, there was this concept called merge mining where people used the same hash to secure other bitcoin clones. Eigenlayer is merge mining for Ethereum but instead you can validate any form of new service like rollups, bridges, oracles, etc."
- **Degen trader** -> Tom: "You have a chicken and egg problem: you want to start a coin, Tron or Tom coin where if you use proof-of-stake consensus with a token or coin, you want the coin to be valuable. But it's not going to be valuable until people are transacting on it, but people are not going to transact on it until it's safe and you have stake securing the network? What if instead you could use something like Ethereum (live and mature) to bootstrap your own network? This is the idea behind Eigenlayer."
- **Developer** -> Tarun: "You can't be certain of the environment for your smart contracts on Ethereum (like validators can reorder). To have full control, you either need to build new infrastructure and nodes for your new L1 or you can use Eigenlayer, which provides economic guarantees that the validators enforce these covenants by giving them extra rules, and they get an economic reward or penalty accordingly."
- **Professor** -> Sreeram: "Everything built on crypto is built on decentralized trust, which is what blockchains like ethereum package groups of nodes coming to consensus and running a particular execution environment into block space, and applications consume this block space and pay for it. But this decentralized trust has been refined for a particular set of design decisions like consensus mechanisms, execution environments, block limits, etc. With Eigenlayer, you can utilize this raw decentralized trust (aka staking and running validation) with fairly low-level programmability over the whole distributed system outside the constraints of Ethereum smart contracts. Node validators can commit the same 32 ETH set aside for Ethereum validation to validate your service. Eigenlayer is a marketplace between trust suppliers (nodes) and trust consumers (bridges, oracles)."

### Restaking ETH vs using your own token

- Sreeram: Empirically, the power of congregation and building on a platform has been stronger than building your own chain because Ethereum provides a shared security substrate whose security can be easily inherited. Only when Ethereum started facing block space scarcity did you see people building new chains. This is analogous to the difference between building a web app in the early internet, where you needed your own authentication, database, payments, etc., and now you can use services like Stripe, AWS, etc. As an application builder, you can focus on your core product instead of worrying about the whole monolith.
- Sreeram: "... existence of a shared security system means that the cost of security has gone down, and the systems building on top of this leverage the economies of scale that's not available to systems that need to emit a 20% emission rate to ensure security."
- Tarun: "Unbundling of transaction propagation is following the second law of thermodynamics' of modularity, as in the complexity keeps increasing with more specialization and it's easier to build on an existing network than start from scratch."
- Haseeb: "The value of your protocol is the difference between how much rake you can take and how much emission you need to pay which is significantly less if you use a less-volatile and highly-liquid collateral like restaked ETH. Your security and governance token doesn't need to be bundled together."
- Sreeram: Already started to see this. L2 tokens aren't used for staking but have value because the fees may be attributed back to token holders.

### Discussion on Vitalik's post

TLDR of the post - don't expect Ethereum's social consensus layer to bend to the needs of individual applications either with a preferential fork or by putting pressure on stakers.

- Robert: "The post focuses on the risk and not the benefits like if it supercharges the validators, that's good for Ethereum."
- Tom: "People don't want to use Ethereum; they want to use the applications that are on Ethereum, and if there is some fundamental problem like a vulnerability in Uniswap and all the value gets drained, the social consensus will rule in favor of the fork."
- Tarun: "Ethereum already made this Faustian bargain when it moved to proof-of-stake and has its associated risks in regards to data availibility, geographic decentralization, etc. The last attempt at this post meant no enshrined delegation which led to Lido."
- Haseeb: "valdators are idelogically aligned with Ethereum and not totally capitalistic."
- Haseeb: Vitalik isn't just pleading for people to not act in a self-interested way but instead advocating that Ethereum needs institutions whose inclusion is enforced by everyone.
- Tarun: ".. it's more like *you shouldn't have done that*"
- Sreeram: It is similar to have the banks expect no bail out from the government. "We're slashing at the core layer, which protects against safety faults and liveness faults. There's a clear boundary between the concerns of the core protocol and the concerns of the free market. Don't externalize the risk between the free market and the core protocol and this is part of Eigenlayer's core philosophy."
- Sreeram: "We have thought about a lot of the issues like slashing risks, centralization risks, and making sure slashing is objective and attributable."
- Sreeram: Vitalik's post did a good job setting a Schelling point on boundary setting and driving people to be more conservative.
- Sounds good in theory but will it be practiced? 
- In case of a potentail Optimism hack, odds are 55-45 in favor of the fork (Tarun)
- For Lido (with <15% of all ETH), is there a soft assurance  "we're behind this"?
- With Optimism, it's less of an issue about the amount of money lost than all the applications and activity. (Haseeb)
- Whichever chain USDC and USDT accept withdrawals on will be the anointed one. (Tom)

- Vitalik, the religious leader, is writing a sermon. "Hey, this is gonna happen, just don't abide by the bad rules." aka  "Aesop's fables of proof-of-stake."